The Zippo controller provides you the following information for the past year:

200,000 units were sold at an average price of $27 per unit

12,000 units were in beginning finished goods inventory and 24,000 units in ending finished goods inventory

Variable manufacturing costs during the year are $13 per unit produced

Variable marketing costs during the year are $4 per unit sold

Fixed costs consist of $520,000 for manufacturing and $360,000 for SG&A

All cost information during the year is the same as last year

1. Using the above information and assuming the fixed manufacturing cost allocation rate is $2.50 per unit, prepare an income statement using variable costing.

2. What is the operating income under absorption costing? Provide a reconciliation with operating income under variable costing.